October 20, 2009

 

US Wheat Outlook on Tuesday: Seen steady-lower in setback from gains

 

 

U.S. wheat futures are poised to start steady to lower Tuesday in a setback from Monday's gains and amid a lack of supportive news, analysts said.

 

In overnight electronic trading, Chicago Board of Trade December wheat ended up 1/4 cent at US$5.18.

 

Wheat should give back some gains from a sharp rally Monday that was supported by strength in neighboring CBOT corn and soybeans and by weakness in the U.S. dollar, said Larry Glenn, broker and analyst at Frontier Ag. Wheat "had a little bit of strength in the night session but we faded into the close of the night session," he said.

 

CBOT corn and soybeans also were weaker overnight and could help drag wheat lower, Glenn said. Wheat will keep an eye on the neighboring markets for direction, traders said.

 

"Wheat could see a soft open this morning after yesterday's gains helped futures at all three exchanges hold chart support," Farm Futures said in a market comment. "Fierce competition for exports remains the dominant feature of the complex right now, though short-covering is helping futures ride the coattails of other markets."

 

There was a lack of unexpected export news out overnight, traders said. Japan said it is seeking 133,000 tonnes of wheat, including 91,000 tonnes from the U.S., in a routine tender.

 

Non-commercial speculative funds continue to hold a large net short position in CBOT wheat, although they have trimmed shorts recently, traders said. Fund buying helped buoy prices Monday, they said.

 

Bulls have upside near-term technical momentum after the recent gains, and there are indications a market low is in place at the CBOT, a technical analyst said. The next downside price objective for the bears is pushing and closing CBOT December wheat below solid technical support at US$4.75, he said. Bulls' next upside price objective is to push and close the contract above solid technical resistance at US$5.60, he said.

 

First resistance is seen at Monday's high of US$5.23 and then at last week's high of US$5.29, the technical analyst said. First support lies at US$5.00 and then at US$4.95, he said.

 

"Our rally with it in here has been technical in nature," Glenn said. "It's been spillover in the corn market. It's been outside the fundamentals of the wheat."

 

There is some concern about the slow pace of U.S. winter wheat seeding, which has been delayed by the late soy harvest and wet weather. Planting was 69% complete as of Sunday, below the average of 78%, according to the U.S. Department of Agriculture.

 

Rain will continue to delay corn and soy harvesting and soft red winter wheat planting in the Midwest this week, according to private weather firm DTN Meteorlogix. Rain in the central and southern Plains "maintains high available soil moisture for [hard red winter] wheat but also delays field work and planting," the firm said.